Ease On Fdi Rules For Construction

(Reuters) - India has eased foreign direct investment rules for the construction sector, the government said on Wednesday, in an effort to attract more money into the country to build new hotels, housing and townships.

Under
the new rules, foreign investment is now allowed in projects with a
minimum built area of 20,000 square metres, down from a previous 50,000
threshold. The minimum capital investment by foreign companies has also
been halved to $5 million, the government said in a statement.

Prime
Minister Narendra Modi has a vision to create 100 new "smart cities" by
2020, and to make that a reality foreign capital is likely to play a
part.

India's
construction industry, worth an estimated $126 billion, attracted 11
percent of all foreign investment into the country between 2000 and
2013, the second highest of any sector, but the pace of investment has
slowed in recent years.

India received $1.2 billion of foreign direct investment in the year to March 31 compared with $1.3 billion the previous year. Between April and August this year, foreign investment totalled $446 million.

Vishwas
Udgirkar, senior director at Deloitte, said the rules would appeal to
investors with less cash or those that wanted to take on less risk, but
that many crucial decisions for investors were out of the hands of the
central government.

"This
sends a signal to investors. But many other things need to be done
simultaneously, at the state level, at the city level," he said.

Decisions
to open up land for development and the granting of various approvals
typically lie with individual states and municipalities in India.

Previously,
India allowed 100 percent foreign direct investment in real estate
development but with strict conditions, including a lock-in period of
three years during which the investment cannot be repatriated.